SAN MARCOS: City sees slow economic recovery

Sales taxes rising while property values remain down

Sales taxes are up slightly in San Marcos, as the city shows
signs of a slow recovery, City Manager Paul Malone told the Budget
Review Committee on Tuesday.

"While revenues are recovering, it's a modest recovery," he
said. "Sales tax is bouncing back somewhat."

The city expects to spend $61.6 million this year, while its
income is also budgeted at about $61.6 million, finance reports
stated. As of last June, the city maintains reserves of $57.6
million, city spokeswoman Jenny Peterson stated in an e-mail.

Last fiscal year, the city spent a little more than $58.6
million and brought in almost $58.8 million, Peterson stated.
Budget projections for fiscal year 2011-12 show $62.6 million in
expenditures and $62.7 million in revenue.

Sales taxes are the largest portion of the city's income,
followed by property taxes and lease revenues from the city's real
estate holdings.

Sales taxes are projected to be $12.7 million for fiscal year
2010-11, and account for 21 percent of general fund revenues, the
city's financial status report for December 2010 stated. Sales
taxes for the third quarter of 2010 were $3.2 million, an increase
of $202,217 over the previous year's income for that period.

"The economy is coming back, but it's not gangbusters," Malone
said.

Property taxes account for 12 percent of the city's revenue, and
are expected to bring in $7.1 million for this fiscal year,
according to the status report. Assessed property value in San
Marcos dropped by 1.28 percent, a slightly smaller dip than the
countywide decline of 1.56 percent, the report stated. That decline
represented a slowdown of property value declines from the previous
fiscal year, when the city had seen a drop of 7.09 percent in
property value, compared to a 2.31 percent drop countywide.

"We bought other properties on the dip and are looking to get
them graded for productive use," he said.

Rental income makes up 10 percent of the city's general fund
revenue, the report stated, and is expected to generate $6.25
million this fiscal year. Malone said rental properties at City
Hall and the city-owned Creekside Marketplace are full, and the
city is seeking to expand its landholdings.

"We're still working the entrepreneurial side of things," he
said.

He said the city faces a deficit of about $2.7 million for
fiscal year 2012-13 because of increases in pension rates. To close
that gap, he said it would move to adopt a two-tiered pension
system. City employees now receive 2.7 percent per year of service,
and can retire at 55, finance director Liliane Serio said. Fire
department staff can retire at 50 with 3 percent per year of
service, she said.

Pension reforms would likely entail adding new employees at a
lower pension rate and higher retirement age, she said, although
the exact changes to the pension system will be decided in labor
negotiations this spring.

Malone said the city expects to close the budget gap with those
changes, along with adjustments to salary increases.

"There's not a lot left unless we start cutting services, and we
don't want to go there," he said. "I don't think we have to do
that."